These are the biggest threats to the cannabis industry, according to top CEOs in the space

The nascent marijuana industry has made
significant strides over the past several years.

Illinois is poised to become the 11th state to
allow recreational cannabis sales, after lawmakers
last week voted to pass legislation considered to
represent the most progressive adultâuse bill in the country.
The passage
of the Farm Bill late last year legalized hemp and
declassified it as a Schedule I controlled substance at the federal
level. And support for marijuana legalization
recently crossed an all-time
high.

But the once-illicit marijuana market still has
hurdles to cross before unlocking its full potential, according to
executives at some of the worldâs leading cannabis companies.

Yahoo Finance asked the CEOs of Acreage Holdings
(ACRGF),
Canopy Growth Corporation (CGC),
Cresco Labs (CRLBF)
and Curaleaf (CURLF)
â all public cannabis companies representing a combined market
capitalization of more than $20 billion â along with analysts and
investors of the space what they thought were the biggest threats
facing the nascent industry.

Black
market

With a decades-long history of illegality, much
of the dealings in the cannabis market still take place under the
table.

âWhat weâre all trying to do, particularly in the
U.S., is convert people from the illicit market to the legal
market,â said Joe Lusardi, CEO of Curaleaf. âI think that the
faster the states move, and create regulated tax frameworks, the
better our companies will do. And the slower they move, the black
market will continue to proliferate.â

In the U.S. â the global demand leader for
cannabis â total legal demand is expected reach $25.7 billion by
2025, up from $10.3 billion in 2018, according to a
recent report from analytics firm
New Frontier Data.

But these estimates are dwarfed when compared to
total demand including the illicit markets. A separate study from New
Frontier Data in April estimates that the total
addressable cannabis market, inclusive of both the regulated and
black markets, reached $344 billion in 2018, with North America
alone comprising $85.6 billion of that sum.

âItâs a combination of legislature and
administrations doing their job, but ultimately, the black market
frankly is our biggest competitor,â Lusardi said. âWe donât view
each other as competitors, frankly. We view this as an industry
that we can all build and prosper from.â

Regulation and public policy

As of 2019, 10 states and the District of
Columbia legalized and rolled out recreational use of cannabis for
adults over 21, and more than 30 states legalized medical use.
Overseas, Canada in October became the second country after Uruguay
to legalize adult use. More than 30 countries have medically legal
marijuana.

A patchwork of cannabis laws across the country â
and rest of the world â have created challenges for multi-state and
multi-national operators.

âPublic policy â do we have a testing standard?
And Iâm talking globally. Do we have it for hemp even nationally?â
said Bruce Linton, CEO of Canopy Growth Corporation. âThe policy is
not actually working for the patients. Itâs not working for
businesses. And so what we have as a risk is they move too slowly
to make a proper platform, and you canât execute in that kind of
weak environment.â

As of early June 2019, 10 states and the
District of Columbia legalized recreational use of cannabis for
adults over 21, and more than 30 states legalized medical use.
(Photo by Miguel MEDINA / AFP) (Photo credit should read MIGUEL
MEDINA/AFP/Getty Images)

More

Linton called out the fogginess surrounding
cannabis policy in the U.K., where medical marijuana was made
permissible last November but has since frustrated many patients
due to an overly bureaucratic system. Canopy Growth
Corporation entered the United Kingdom
earlier this year by way of a joint venture with research
company Beckley Canopy Therapeutics.

âItâs got to be regulation,â Jason Wilson,
President of Budding Equity Asset Management, said when asked about
the biggest threat to the industry. âAt the end of the day, the
biggest challenge is going to be getting not just regulation in the
U.S., but globally.â

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continues

âThatâs one of the larger hurdles, but thereâs no
question for the demand. Thereâs billions of people that are in
countries that are already legal, at least medicinally,â Wilson
added. âAnd itâs just how quickly it happens will depend on how
quickly those regulations move along.â

Consistency and execution

According to Kevin Murphy, CEO of Acreage
Holdings, and Charlie Bachtell, CEO of Cresco Labs, the biggest
threats to the cannabis industry are âexecution,â and âconsistencyâ
â on the part of both public policymakers and companies in the
sector.

âThereâs a common thread between, I think, the
three of our answers,â Bachtell said of his, Murphyâs and Lintonâs
responses. âItâs incumbent upon the operators to make sure that the
products, that weâre meeting the expectations of what it means to
be a national industry, similar to consumer packaged goods, where
you need quality, consistency and availability.â

âIf we fail to execute, if thereâs not
consistency, youâll have public policy issues,â he said.

Read the latest
financial and business news from Yahoo Finance

â

Emily McCormick is a reporter for Yahoo
Finance.Follow her on Twitter:
@emily_mcck

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